Mayor’s Proposal to Aid Business Meets Council Resistance : Government: Several O’Connor initiatives gain quick approval, but tax suspension idea gets cold shoulder.

Although in general agreement that something needs to be done to buoy the ailing hotel and motel industry and other businesses in San Diego, members of the City Council said Tuesday that they do not completely agree with Mayor Maureen O’Connor’s proposal for recovery.

In her final State of the City address last week, O’Connor outlined a plan to breathe life into a stalled local economy, making a special effort to assist companies by temporarily suspending the collection of business taxes, and allowing hotel and motel operators to hold onto revenues longer than before.

“In my opinion, we’re heading into a slow-motion depression,” she said Tuesday. “I don’t know how to explain this to everybody, and I’m trying the best I can, but these are difficult times, and we’ve got to start looking at different solutions or you are going to see more of the same.”

Although council members readily approved several of O’Connor’s initiatives, such as urging the Metropolitan Transit Development Board to offer free bus and trolley passes to the newly unemployed and to begin construction of $215 million in city projects, they could not agree on exactly what to do about business and hotel taxes.

O’Connor wants business taxes suspended for companies with 10 or more employees for six months. About 5,800 businesses fall under that category, and the city would lose about $1 million in revenue during the half year.

A majority of the council, however, referring to a city attorney’s opinion that the proposal might amount to discrimination against 49,000 other businesses in San Diego, said it wanted the suspension of taxes applied to all companies.

In her speech last week, O’Connor also broached the idea of halting collection of the transient-occupancy tax on hotels and motels for six months.

Hotel and motel owners would be required to pay back the money, now collected each month, but would be free to use the interest accrued during the six months for whatever purpose they wished. It is estimated that the interest would amount to about $245,000 over six months.

Rushton Hays, president of the San Diego County Hotel-Motel Assn., said the past year’s occupancy average is a little more than 50%, whereas it has been in the 60s and 70s over the past several years.

“It’s real bad,” he said. “It’s lower than we’ve been in seven or eight years.”

Councilman Bob Filner said the suspension of hotel taxes “sets a dangerous precedent” because troubled hotels and motels may go bankrupt and tie up taxpayer money in the process. He is also concerned that one industry is being favored over another.

“This has grave legal and policy issues I don’t think you want us to get into,” Filner told the mayor. “To say that one industry in town should (be singled out) . . . “ is unfair.

Unwilling to let the issue die, O’Connor quickly suggested rolling back the 9% room tax 1%, a move that would cost the city about $2.5 million over six months.

“This is an industry in town that is in trouble, and we need to come up with something,” she said.

Either proposal would hurt city revenues, said City Manager Jack McGrory, who opposes both.

“It hurts the cash flow to the extent that we would not have that money in the bank that would be collecting interest,” he said. “We have been counting on that.”

Discussion about both taxes raised questions about whether the money would even do any good.

The accrual of $245,000 in interest for dozens of hotels and motels, for example, would probably do little to keep a financially troubled business afloat, some council members said.

The suspension of a business taxes of up to $1 million over six months amounts to only $172 for each of the companies affected.

“I just not sure of what kind of help we’re offering,” Filner said.

Councilman Ron Roberts, who last week said the city could come up with an extra $10 million a year for eight or nine years to hire more police officers, said Tuesday that he wonders how the council would find the money to replace the proposed tax cuts.

“Heretofore, we’ve been talking about all this cutting of revenues,” he said. “I want to know where the heck it’s going to come from. If there are dollars sitting around, I’d like to know about it and put the dollars to work doing a number of things.”

Future budgets will reflect a decrease in property taxes because of the economy, Roberts said, and the loss of that money will have to be compensated.

“I applaud the mayor for showing the concern, but I want to make sure we don’t do something we have to undo a few weeks later,” Roberts said.

Both tax-cutting proposals have been sent back to McGrory, who is to meet with business and industry leaders before returning with alternatives in two weeks.